Archive for category: SOCIALIST APPEAL

In February 1848, the workers of Paris overthrew their king and founded the Second French Republic. Months later they would rise again, in what became known as the ‘June Days’, which Karl Marx described at the time as “the greatest revolution that has ever taken place…a revolution of the proletariat against the bourgeoisie”.

The workers went down to defeat in June 1848. But their heroic struggle passed down a legacy and lessons which remain extremely valuable to workers of today.

The July monarchy

France in the 1830s and 1840s lived under the so-called ‘July monarchy’ of King Louis-Philippe. The regime was a hotbed of corruption.

Through the ever-expanding national debt and the distribution of contracts for public works, the ministers “piled the main burdens on the state, and secured the golden fruits to the speculating finance aristocracy”, in Marx’s words. This state of affairs will feel very familiar to anyone living in Britain today.

The young working class was ruthlessly exploited under this ‘bourgeois monarchy’, often working 14 – or even 18 – hours a day, earning barely enough to survive. The lack of housing meant that workers and their families were crammed into tiny rooms, forced to live in the most squalid conditions imaginable.

But it was also in this period that the workers began to forge their own organisations and education societies, where the ideas of socialism were eagerly debated. The most well-known socialist of the 1840s was Louis Blanc, who published his best-known work, The Organisation of Labour, in 1839.

Taking up the ‘right to work’ – an idea first put forward by utopian socialist Charles Fourier – as his slogan, Blanc called for the creation of ‘social workshops’ by the state, which would offer employment to all.

The February Revolution

France was rocked by a deep economic crisis in 1846 and 1847. In this context of instability, the liberal opposition resolved to strengthen its case for electoral reform by appealing directly to the people, or at least the respectable middle classes, who would stand to gain from their modest extension of the franchise.

The monarchy’s draconian anti-assembly laws, however, made it impossible for them to hold political meetings or rallies. Instead, they announced a campaign of ‘banquets’, in which attendees would pay an entrance fee to receive some food, wine for toasts, and then be harangued by a handful of well-known speakers.

The first banquet of the campaign took place in Paris in July 1847. Immediately, the campaign came under the influence of the more radical ‘Democrats’, who were supporters of universal suffrage.

As the campaign progressed, the workers were also drawn into the political struggle. But in addition to the vote, they also raised their own social demands, just like the British Chartists. At a banquet in Chartres for example, ‘the organisation of labour’ was raised as a demand alongside universal suffrage.

In parliament, the banquet campaign had done nothing to break the resistance of the government. In an atmosphere of escalating tension, liberal deputy Alexis de Tocqueville offered the following warning:

“This, gentlemen, is my profound conviction: I believe that we are at this moment sleeping on a volcano.”

When the authorities banned the last of the banquets, in Paris on 22 February 1848, this volcano erupted.

In the working-class districts of the city, arms shops were looted and barricades began to be built immediately. The next morning, the National Guard was called out to restore order. But instead they came chanting ‘Long live reform!’

The king dismissed the government, hoping to quell the revolt. But this only urged the masses on. When a column of protestors carrying a red flag pressed up against a line of infantry, the troops fired directly into the crowd. Fifty-two were killed on the spot.

The workers were enraged by the massacre, pledging, ‘Vengeance!’ From this point the fate of the monarchy was sealed.

By the next day the city was under the control of the armed working class. As the abdication of the king in favour of his nine-year-old grandson was being announced, the parliament was invaded by the revolutionary workers, who forced the proclamation of the Republic.

The workers betrayed

At all stages of the revolution of February 1848, the initiative belonged to the working class.

It was the workers who built and died on the barricades. And it was the workers who forced the proclamation of the Republic. But the class that was brought to power as a result of this workers’ revolution was not the working class. Nor did their representatives even obtain a majority.

The Provisional Government which was handed power on 24 February was overwhelmingly made up of ‘pure’, or ‘moderate’ republicans, with a couple of socialists like Louis Blanc tacked on under pressure from the workers.

The workers’ insurrection had placed its enemies in power. Leon Trotsky called this the “paradox of the February Revolution” in 1917, which applies just as well to February 1848.

On the streets of Paris, meanwhile, the armed workers remained the almost undisputed power. And having conquered the Republic, they naturally sought in it their liberation from poverty and oppression.

At noon on 25 February, day one of the new republic, a detachment of armed workers marched to the Hôtel de Ville. One of their number slammed the butt of his musket on the floor and demanded: “Droit au travail [right to work]”.

Blanc, seeing his own slogan menacingly thrust at him, immediately drafted one of the first decrees of the provisional government:

“The provisional government of the French republic pledges itself to guarantee the means of subsistence of the workingman by labour.

“It pledges itself to guarantee labour to all citizens.”

The same decree announced the creation of ‘national workshops’ to provide employment for all.

Overnight, the workers of Paris had effectively made Louis Blanc’s programme the law of the land, much to the surprise of its author. But Blanc himself was kept as far from the means to realise it as possible. Instead he was given a ‘commission’ to look into the question of the organisation of labour, without any power or budget to offer any practical solution.

Meanwhile, 100,000 unemployed workers were enrolled into the national workshops. But the task of finding and organising the work for this army of unemployed was given not to Blanc, but to Alexandre Marie, who was hostile to socialism.

Enrolled workers were given projects such as levelling the Champs de Mars. Employment on more useful projects such as building railways or canals was rejected by the government.

Unsurprisingly this arrangement pleased no one. Respectable society was scandalised by the sight of thousands of workers being paid public money in return for enforced idleness, while the workers themselves were bitterly disappointed.

For them, the ‘right to work’ signified not charity, but the organisation of production in order to guarantee useful work to everyone in accordance with their skills. What they wanted, in essence, was socialism. What they got was grimly described by Marx as “English workhouses in the open”.

The revolutionary clubs

One of the most inspiring products of the February Revolution was the club movement. The ‘clubs’ took their name from the clubs of the Great French Revolution. But they possessed a very different class content.

Even the most radical clubs of the first revolution were a largely bourgeois affair. The clubs of 1848, on the other hand, were a cross between workers’ assemblies and political parties. They would meet regularly to discuss the pressing matters of the day, as well as questions of economic and political theory.

By mid-April there were 203 clubs in Paris alone, of which 149 were united in a single federation. They were essentially organs of workers’ democracy, growing rapidly out of the daily tasks of the revolution.

Marx described the clubs as “the centres of the revolutionary proletariat”, and even “the formation of a workers’ state against the bourgeois state”.

A key question for the club movement was that of its position in relation to the provisional government: should it support the government, albeit critically, or move to overthrow it? The majority of the Paris clubs took a conciliatory position, seeing their role as a support for and, if necessary, a check on the government.

The attitude of the Provisional Government towards the clubs, on the other hand, was more of fear and loathing, than surveillance and support.

So long as the armed workers were the main power on the streets, the Provisional Government would have to temporise, offering many concessions. But no one in the government had any illusions in this temporary state of affairs.

The government advances

The government was strengthened by the elections, which took place on 23 and 24 April 1848.

All Frenchmen over the age of 21 were eligible to vote for 900 deputies to a single National Assembly. This realised almost all of the political demands of the British Chartists, who had held a huge demonstration in London only weeks earlier.

The result was an overwhelming victory for the provisional government and the bourgeois republic. Almost every successful candidate ran as a ‘republican’ – including many monarchists! This showed the mood that existed in the country. But radical and socialist deputies only took up around 55 of the 900 seats in the assembly.

It must be remembered that the working class constituted a tiny minority of the French population at this time, and the vast majority of the electorate were peasants, living in the countryside.

A significant section of the peasantry would later shift violently to the left, but this would take time and experience. It was inevitable that at this stage the socialists would find themselves isolated.

The revolutionary workers in the clubs were disgusted by the result of the election, and began immediately calling for the overthrow of the assembly. Meanwhile, the government purged itself of its socialist members, Blanc and Albert, and prepared for war.

On 24 May, it was announced that the workers enlisted in the national workshops would either be drafted into the army or forced out of Paris.

The workers were faced with the dissolution of their organisations, deportation, and destitution. On 22 June, Louis Pujol, a lieutenant in the workshops, led a demonstration to the Ministry of Public Works and confronted the minister, Marie, who told them: “If the workers don’t want to go to the provinces, we shall make them go by force.”

That evening Pujol addressed a mass meeting at the Panthéon. “The people have been deceived!” he cried. “You have done nothing more than change tyrants, and the tyrants of today are more odious than those who have been driven out…You must take vengeance!”

The June Days

On 23 June, barricades began to rise in Paris. By noon, almost all of the eastern part of the city was under the control of roughly 50,000 insurgents – although the armed fighters were undoubtedly supported by an even broader layer of the working-class population.

At the same time, the National Guard had been called out. But the response was extremely mixed. In eastern Paris, National Guardsmen allowed themselves to be disarmed by the workers or actively joined the insurrection. In the wealthier, western part of the city, however, the response to their orders was emphatic.

By eleven o’clock that evening, there were already 1,000 dead, with no end to the fighting in sight. All of the most prominent workers’ leaders either betrayed, or were killed, arrested, or in exile. Not a single socialist or radical deputy in the National Assembly supported the insurrection.

The ‘democratic socialist’ paper, La Réforme, explained, “We were ardent revolutionaries” under the monarchy, but “we are progressive democrats under the Republic, with no other code but universal suffrage”.

Louis Blanc signed a declaration calling upon the workers to throw down their “fratricidal weapons”, alleging they were “victims of a fatal misunderstanding”.

In theory, Blanc saw the democratic republic as a means of emancipating the working class. But in practice, his faith in the bourgeois state led him to defend it above all else, even against the very workers it was supposed to serve. This fatal flaw of reformism would return to haunt the working class time and time again throughout the world.

A state of siege was officially declared in Paris, and General Eugene Cavaignac was invested with dictatorial powers to defeat the insurrection.

Engels reported: “Today…the artillery is brought everywhere into action not only against the barricades but also against houses.” Many captured insurgents were shot on the spot and thrown into the Seine.

In contrast, in the areas under their control, the workers maintained perfect order. Only the gun shops were looted, and prisoners taken during the fighting were often set free.

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Defeat

Crucially, the workers fought alone. This fact, above all, determined the result.

The February Revolution had been led by the workers. But it was supported by a decisive section of the small property owners and artisans of Paris, who constituted the majority of the city’s population at the time. In June 1848, this ‘petty bourgeoisie’ sided with the defenders of private property against the workers.

In the meantime, up to 100,000 volunteers from the rural provinces were flooding into the city, travelling from as far as 500 miles away to fight against the insurrection. Blasted by explosive shells and surrounded on all sides, the insurrection began to retreat.

On the third day, the tide began to turn against the workers. And on Monday 26 June, the last barricade was cleared by Cavaignac’s troops. The Paris workers, isolated, without centralised leadership or artillery of their own, had held out for four full days against the full military might of bourgeois ‘civilisation’.

The government reported 708 casualties. The total number of insurgents was not accurately reported, but likely mounted into the thousands. Thousands more were deported to penal colonies in Algeria.

Paris had never seen such bloody fighting, which would only be surpassed by the crushing of the Paris Commune in the ‘bloody week’ of 21-28 May 1871.

What distinguished June 1848 from all previous insurrections was not only its scale. The June Revolution was arguably the first time the proletariat assailed the class rule of the bourgeoisie directly, in its own name.

That the workers and their leaders, experimenting and groping their way forward, made mistakes is undeniable; such is the lot of all pioneers.

This was still an early stage in the development of the working class. Not only was there no real party of the working class at this stage, even the trade union movement was under-developed and largely limited to specific crafts.

But that they came so close to victory, at a time when they constituted a minority even in Paris, let alone in the rest of France, is much more significant.

The workers had learned and achieved more in just over three months than in the preceding three decades.

Having won the democratic republic, the workers immediately sought to use it for their own ends. Blocked by the very institutions they had brought into being, they created their own democratic organs for the conquest of power and for the socialist transformation of society.

And in their defeat, the workers had passed down an immense revolutionary legacy.

Workers’ power

The titanic events of June 1848 also had an extremely important impact on the development of Marxism.

Drawing directly from the experience of the Paris workers, Marx issued an address to his organisation, the Communist League, in 1850. In it, he insisted that in a future revolution:

“Alongside the new official governments [the workers] must simultaneously establish their own revolutionary workers’ governments, either in the form of local executive committees and councils or through workers’ clubs or committees.”

Further, he explained that the aim of these councils or clubs should not be to support the official government, but to expose and eventually overthrow it, establishing what he termed “the dictatorship of the proletariat” – the class rule of the workers.

“Their battle-cry”, he concluded, “must be: The Permanent Revolution.”

Eventually, what June 1848 had only decreed in words was eventually carried out in practice by the Paris Commune of 1871: the first workers’ state in history.

These lessons were also studied carefully by Lenin and Trotsky, who applied them so successfully in 1917. It is therefore no exaggeration to say there is a direct link between the defeat of the workers in June 1848 and their victory in October 1917.

Today

These events still have a lot to teach us today. Global capitalism faces the deepest crisis in its history. Already, across the globe, the masses have toppled one government after another in search of a better life. And this is only the beginning.

In Europe, a level of corruption and malaise comparable to the last days of the July monarchy can be felt by all layers of society.

Like de Tocqueville in January 1848, the most farsighted representatives of the present order see the danger ahead. The volcano of revolution threatens to erupt once again.

But the modern working class is incomparably stronger than it was in 1848. And the possibility of the socialist transformation of society has never been greater. With a revolutionary leadership, guided by the lessons of history, its victory is assured.

Workers of the world: unite!

The crisis in Ukraine has created a perfect inflationary storm. The war, the western sanctions on Russia, the pandemic, protectionism, and climate change are unravelling decades of low commodity prices in a crisis that is only getting deeper.

This unprecedented concatenation of factors is preparing a disaster, as summed up in a sobering analysis by Pascal Lamy, former Director-General of the World Trade Organisation:

“Frankly speaking, when I look at things to come, I’m pretty horrified, and I’ve been in international issues for, what, 30, 40 years of my life. I think I never saw a period where the risks were as high with this cumulation of Covid impact on the world economy, especially on developing countries; the food crisis; the energy price crisis; the debt crisis, which is looming in many parts of the developing countries; the impact of this on the financial system. I see risks piling up. And of course, you know, the invasion of Ukraine is a sort of straw that really could break the camel’s back, and I’m much more worried than I’ve ever been in the last decades, unfortunately.” (‘Le Pen, patriots and the anti-globalist movement’, Financial Times)

Food industry in crisis

Russia’s invasion of Ukraine has caused a huge set of problems for the world economy. In the first instance, Ukraine and Russia are responsible for a large proportion of the world’s food supply. Together they produce 12 percent of the world’s tradeable calories, but they only have 2 percent of the global population between them. Their grain exports in particular are a crucial lifeline to countries in the Middle East. But the crisis is having an impact on prices worldwide.

Ukraine’s harvests are being badly affected by the war. Much of last year’s crop is still stuck in warehouses. And this year’s crop will be hampered by the war in numerous ways. Parts of the country are occupied by Russia, and there is major disruption of infrastructure, whether by bombs or by being used by the military. There is also a shortage of labour power, as many men have been conscripted into the army.

Meanwhile, Russia has banned exports of food to ensure its own supplies. Its exports are also being restricted by western sanctions.

As a result, wheat prices have increased by one third, which is a massive jump. And they are predicted to increase by another few percent before the end of the year. This will have devastating consequences for those that rely on bread as their main source of calories. But it will inevitably also have knock-on effects on other foodstuffs, as people switch to eating rice, potatoes, etc.

The issue of climate change is also a factor in the equation. For example, the recent heatwave in India hit wheat production hard, and the forecast of this year’s wheat crop is down 5 percent. This constitutes another blow to the world market for wheat, which can’t afford any more shocks to supply.

Food prices in general on the wholesale market are up 55 percent since 2020, and 17 percent since the beginning of the year. This is having a major impact on the poor across the world. Sub-Saharan Africa, for example, imports 85 percent of its wheat, and food accounts for 40 percent of consumer spending in the region.

In an attempt to ease the strain, the current Director-General of the WTO, Ngozi Okonjo-Iweala, recently went begging to Brazilian President Jair Bolsonaro, asking him to take measures to increase production of food. “I’m very concerned about the pending food crisis and steps we need to take,” she told journalists in Washington.

To make matters worse, the price of fertiliser has doubled since last year. Russia was the world’s largest exporter of fertiliser, and has now banned exports. On top of that, natural gas is a key component in the production of fertiliser, and gas prices, as is well known, have shot through the roof.

The war is only intensifying problems that already existed, however. Prices of urea rose by 50 percent between March and October last year, leading China to introduce barriers to fertiliser exports. They are trying to keep prices on the Chinese market below those of the world market.

Anecdotally, the combination of increased costs of energy and fertiliser is wreaking havoc in food production in greenhouses. Producers are unable to make money from selling their crops, and are closing down production to avoid running at a loss. Of course, this will add further pressure to already strained markets for food.

Protecting the food supply

Under pressure from the crisis in the food industry, several countries have opted to protect their own consumers from rising world market prices.

The war took Russian and Ukrainian supplies of vegetable oil off the market. But this also pushed the Indonesian government to do the same to ensure domestic prices were kept down. This has meant that 40 percent of the world’s supply of vegetable oil has now become very difficult to access. Prices have increased 150 percent as a consequence.

The problems with the harvest in India have led to speculation that the government there might decide to restrict its exports, something the government has denied so far. Should this become a more serious prospect, traders are worried that it will create panic in the global wheat markets.

Other countries have taken measures to ban the export of cereals, all of which contributes to higher prices on the world market. This will create difficulties for domestic producers, as they will have to contend with higher costs of diesel etc., but can’t export and therefore can’t take advantage of the higher world market prices for their products to compensate.

It also undermines trust in the world trade system. If they can’t rely on the world market to feed their populations, it means countries will be pushed to introduce tariffs and other export barriers in order to support their own farming sectors. Inevitably, it will mean more expensive products. The same goes for traders, who will have to consider all kinds of additional risks before they decide where to get their supplies from.

Special crisis of British capitalism

The situation is bad everywhere, but Britain is facing the worst inflation in western Europe. For a country with a substantial oil and gas industry of its own, it has been badly affected by the energy price hikes.

The government introduced an energy price cap in 2019, but it had limited impact in its first few years of existence, as most households had contracts below the cap. Now, however, the price cap has become the price that practically everyone pays. And it rose by 54 percent in April, with another 30 percent increase is expected in October.

With many households already in poverty and struggling to make ends meet, Keith Anderson, chief executive of Scottish Power, said: “Come October, [the situation is] going to get horrific, truly horrific.”

The French energy giant EDF says vulnerable customers in Britain will go from spending £1 for every £12 they earn on their energy to £1 for every £6 they earn this year. The employers’ association CBI said that putting pounds in the pockets of people struggling “should not be delayed”.

And the difficulties are not limited to energy, the central bank expects inflation to hit 10 percent before the end of the year, in spite of the growth rate falling. The governor of the Bank of England says they are walking a “very, very fine line” between failing to keep inflation at bay, and the risk of creating a deep recession as the economy is hit by higher interest rates, as well as consumers’ spending power being undermined by inflation.

In fact, Bailey just predicted that inflation would hit 10 percent in the UK before the end of the year, but said that the Bank of England is powerless to do anything about it.

Stagflation looms

Inflationary pressures are seriously hampering the post-COVID recovery. Throughout the pandemic, the central banks were pumping trillions of dollars into the economy to keep it afloat. This money is now fuelling the current inflationary spiral.

In an attempt to rein in inflation, central banks are being forced to raise interest rates and remove (‘taper’) the money put into circulation. In doing so, however, they’re pouring cold water on the economy.

The worry is that, not only will they fail to curb inflation, but they will also sink the economy back to zero growth, or even into recession. This is certainly what the governor of the Bank of England has hinted at. This is what they refer to as ‘stagflation’ (stagnation and inflation at the same time).

Rising interest rates as well as rising living costs, unless combined with a rise in wages, will undermine the purchasing power of the working class. Thus, it will put a big dampener on consumption.

The more far-sighted economists understand the dangers implicit in these conditions. In the New York Times, Victoria Greene from G Squared Private Wealth states:

“There are definitely a lot of open-ended and unquantified risks looming. […] The U.S. economy lives and dies for the consumer, and as soon as this consumer starts to slow down. I think that will hit the economy hard.”

Meanwhile, Joe Hayes, an economist with S&P Global (the ratings agency), made a similar point in the Wall Street Journal:

“Given how rampant inflation is at present, it’s difficult to see sustained post pandemic recovery efforts offsetting the negative impact from rising prices.”

The starkest warning came from former Goldman Sachs CEO Lloyd Blankfein, who warned corporations to prepare for recession. In an interview with Bloomberg, he said that there was a “very, very high risk” of recession, citing government stimulus, supply chain problems, Chinese lockdowns, and war in Ukraine as creating enormous obstacles to central banks getting inflation under control. According to Blankfein, there’s a very narrow “narrow path” to avoiding recession.

The reality is that central banks are caught between a rock and a hard place. They can’t let inflation spiral. But neither can they really curtail it, because they will cause a recession. And even a recession might be insufficient to bring inflation to heel.

Crisis of logistics

What is perhaps even worse than the impact that the crisis is having on consumer prices is rising prices further up the production chain. Cost increases here are much higher than in the field of consumer markets, and will inevitably have a knock-on effect throughout the system.

A serious crisis in logistics began during the pandemic, with the cost of shipping and freight transport increasing dramatically. Changing consumption patterns, combined with the anarchy of the market, created massive supply bottlenecks that massively increased prices of transport. These have eased over the past month. But the underlying costs have at the same time been increasing.

The price of diesel in Europe, which is particularly badly hit, has increased by about 63 percent compared to pre-pandemic levels. This is caused by the increase in the price of oil, but also Europe’s large dependence on Russian diesel exports.

Also, the cost of tires and spare parts have, anecdotally, often doubled. Pallets have also been affected by a big shortage. Around 25 percent of Europe’s supply of soft wood, used to make pallets, is inaccessible because of the war and the sanctions. In addition, a yearly supply of 20 million pallets from Ukraine and Russia is inaccessible, leading the cost of pallets to almost triple, rising from €9 to €23.

The war in Ukraine is seriously impacting transport in several different ways. Whatever easing we have seen of transport prices in the past month or so could easily go the other way, as the increased costs for logistics companies start to feed through the system.

Cost of raw materials

And it’s not just transport where industry is facing difficulties. The price of all kinds of raw materials for production are rising. Russia is one of the more important sources of minerals, many of which are used in modern production. And with the loss of much of the supply from Russia, prices are increasing.

Tesla CEO, Elon Musk complained about this at an earnings call for shareholders back in April. “I think the official numbers actually understate the true magnitude of inflation,” he said. He went on to predict that inflation will continue for at least the rest of the year, and added that suppliers were asking for 20 percent to 30 percent increases for parts.

And it’s not just Tesla. German producer prices for industrial products rose by 30.9 percent, which is the highest rate of increase since 1949. German industries are facing a cost hike in energy prices by 84 percent, with prices for natural gas up 145 percent. The price increases led the IMF to cut its growth forecast for the German economy by 1.7 percentage points.

Crisis in China

Already, China is in a sharp slowdown because of its COVID lockdowns, which are affecting an estimated 300 million people. Industrial production dropped by 2.9 percent and retail sales were down 11 percent in April. Car production was down 41 percent, and new construction starts down 44 percent. This will reverberate throughout the world economy.

The central bank and government are trying to boost consumer spending by boosting credit. But the measures are having little impact. China is in the middle of a crisis in real estate, starting with Evergrande.

Only last week, another company, Sunac, defaulted on its debt. The measures, which are similar to those carried out in the West two years ago, will have little impact now, and will prepare a worse crisis in the future.

Over the past month, much of China’s manufacturing output has been hampered by the stringent anti-COVID measures in Shanghai, the world’s largest port. This has led to lower shipping costs, but higher prices for everything else.

The slowdown in production in China will remove supplies of all kinds of raw materials and consumer goods, putting even more pressure on world market prices.

Of course, at a certain point, the lockdowns will be lifted. But as we have learned over the last couple of years, all kinds of bottlenecks emerge when lockdowns are lifted.

Capitalism, because of its anarchic nature, is simply incapable of planning for such events. And government intervention is a very blunt tool to resolve these problems.

Threat to world trade

With all these different pressures emerging on prices, central banks will be unable to contain the situation. More worryingly still, the pandemic and increasing tensions between the world powers – with the war in Ukraine being the final straw – are causing globalisation to be rolled back.

Larry Fink, the CEO of the world’s largest asset manager, BlackRock, warned about this in a recent letter to shareholders: “The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades.”

Ever since the 1970s, inflation has been kept at bay partly by globalisation, with the resultant increasing international division of labour bringing down costs.

Lenin and Trotsky explained that there are two barriers to the development of the economy (the productive forces) under capitalism: private property and the nation state. The latter was partially overcome precisely by globalisation. Massive factories, like the ones that have been built in East Asia, which have a very high level of productivity, have pushed down prices of consumer goods.

Globalisation has lowered the price of machinery, and made it more profitable to invest in mechanisation and other labour-saving devices. The IMF considers that the lowering of tariffs and other trade barriers are responsible for 60 percent of the reduction in the costs of machinery compared to consumer products.

So, even if the productivity of labour hasn’t grown as much as in the past, it would have been even worse without the expansion of world trade.

The opening up of world trade – what the bourgeois commentators dubbed ‘globalisation’ – was essential to keeping the economy growing, and inflation at bay, over the past few decades. But this has now come to an end.

End of globalisation

With globalisation being thrown into the reverse, companies are realising that their supply chains are very vulnerable to what they call ‘geopolitical risks’. That is, conflicts involving the main imperialist powers.

So, we find for example that the German car industry had to shut down some production lines because it lacked the wiring harnesses that were being produced in Ukraine. This affected Volkswagen, BMW, and truck-maker MAN.

The EU and the US are desperately trying to find alternative sources of oil, diesel, and natural gas. But it is very difficult, and is going to mean much more expensive fuel in the coming period.

Although all the focus at the moment is on Russia, the real adversary of the US bourgeois is China. The US ruling class has realised that some key components are produced almost exclusively in China and its environs, and are taking measures to reduce their reliance on these supplies. But this process of ‘decoupling’ from Chinese-produced materials is neither easy nor cheap.

Indispensable lithium

As everyone is trying to switch over to electric cars, a big question mark has been raised over how to get hold of the components for the batteries, which is the most difficult part of the vehicle to produce.

At the moment, China produces 80 percent of battery-grade lithium hydroxide, which is the key component in batteries. Although the lithium is often mined elsewhere, the refining is overwhelmingly done in China.

The question that the car companies and others are asking themselves is: What if the US was to impose sanctions on China like it is doing on Russia right now? How would all those manufacturers that rely on lithium batteries cope?

In response to this uncertainty, Western companies are developing their own lithium hydroxide production capacities. One of the new refineries is being built in Australia, in the lithium mining area of Kwinana. Doing the refining in Australia would protect Kwinana’s production from geopolitical risk.

A trader from Redpoint Investment Management commented to the FT:

“The fact that some of these materials are going to become so important means you need diversity of supply. You can’t have the risk that it comes from one place.”

He continued:

“They’ll have to run the operations under Australian government rule. [So] if it’s based in Australia, you do get rid of geopolitical risk.”

Just this week, plans were announced for another plant in the UK, as a complement to the building of new battery factories in Europe.

Who controls the microchips?

Another example is the production of semiconductors, 75 percent of which are now produced in East Asia, led by Taiwan and South Korea, but increasingly also China. Taiwan alone produces 90 percent of the most advanced microchips.

As China is increasingly asserting its control over the South China Sea, it is also asserting its control over the most important trade routes for semiconductors. Any serious sanction or trade war between China and the United States could possibly cut off the supply of semiconductors, which is essential for all whitegoods, electronics, and vehicles.

This has led to attempts by western governments to develop their own microchip industry. The US enacted a ‘Chips Act’ last year, and the EU is following suit this year. As the CEO of Intel Pat Gelsinger recently stated, “We seek to rebuild the entire supply chain on US soil”.

His sentiments are echoed by US President Joe Biden, who said in a speech on 21 January: “To be able to say Made in Ohio, Made in America, what we used to always be able to say, 25-30 years ago. That’s what this is about.”

This is protectionism, pure and simple. And it is going to wreak havoc with the world markets. Of course, some of these sectors are facing shortages anyway. But by putting up barriers and granting subsidies to domestic companies, governments and companies are raising the cost of production.

Refashioning supply chains will inevitably lead to higher prices in the long run. It is one of the consequences of the trade war with China that began under Trump, and which continues to this day. But it was amplified first by the pandemic and now by the Ukraine war and the resulting sanctions.

By shifting their supply chains away from Russia and China, companies are making them more expensive. Yet, amidst increasingly convulsive international relations, they have precious little choice.

Cost of war

In all this, the ruling class is solemnly telling the workers that it is our duty to do the right thing and maintain the sanctions on Russia. Both Biden and UK foreign secretary Liz Truss suggested that a price will have to be paid, but it is a price worth paying. Of course, they will not be paying it themselves.

At some point, workers will be asked to pay the tens of billions of dollars of arms that are being poured into Ukraine. They will be asked to pay for massive increases in domestic military expenditure. There’s no such thing as a free lunch, as the capitalist commentators are always keen to point out.

But it doesn’t stop there. The massive expansion of military expenditure will only make inflation worse. Instead of using resources to raise education standards, or invest in new machinery, better public transport or roads, the government will be putting even more pressure on strained markets for raw materials to produce very expensive weapons.

At best, these weapons are merely very expensive pieces of junk. At worst, they will be used to kill workers and farmers, and destroy factories and farms. Far from solving the problems of the economy, they merely make the situation worse.

In a striking article in the FT, Martin Sandbu lays out what the ruling class is thinking, but has the good sense to not say too loudly. He mentions that people won’t be able to buy healthy meals for their children; won’t be able to pay for their energy; and that we might have to ration some essential goods.

He suggests that politicians should explain the pain that is coming, and that is due to the war (among other things). And then he says that this is the “price of freedom… paid by Ukrainians first and foremost, but also by so many of you”.

With such solemn declarations, many workers will wonder if someone is going to ask for their opinions. Is their children’s health really something to sacrifice at the altar of NATO’s imperialist ambitions?

These commentators and politicians are once more talking about us being ‘all in it together’, saying that the ‘broadest shoulders must contribute more’. But in reality, the burden is far-from-evenly shared.

It is abundantly clear that the price for the imperialist power struggles is being paid by workers and the poor, and no one else. And the price is getting higher by the day.

New normal

“Chair Jay Powell has emphasised the importance of a ‘soft landing’. The Philadelphia Fed’s Patrick Harker cautions that the Fed should not ‘ruin the economy’ by being ‘too aggressive’ on inflation. San Francisco president Mary Daly said the Fed should perform a hike such that inflation falls to 2 percent, five years from now, implying that she is content with it staying above the central bank’s target for a half decade!” (‘The Fed has changed its message, but not the way you think’, FT Alphaville)

The bourgeois are now seriously worried about the prospect of inflation that they can’t get under control. The prospect now is not for a quick return to inflation of 2 percent or so, but that this higher inflation will last for years and possibly decades.

This has serious implications for the class struggle. 5-10 percent inflation will quickly eat away at wages, and depress real earnings. It will be a very quick transfer of money from the workers, who will get less for their wages, to companies, which will charge higher prices.

Not all companies will benefit. Mostly it will be the big monopolies. They can control prices from suppliers, and can set prices for consumers, without running the risk that other companies will undercut them.

The losers will be the working class, unless they struggle to defend the purchasing power of their wages. Inflation is therefore a finished recipe for class struggle.

It’s symptomatic of the coming period that European Central Bank (ECB) President Christine Lagarde had to send an email to employees at the ECB arguing against linking wage increases to inflation (a sliding scale of wages). She said “an indexation of salaries to inflation is not desirable and not intended.” Apparently, the union representing these workers had asked for precisely such an indexation.

Lagarde knows this is an explosive question. She is not the least bit interested in setting an example for others to follow, because demands like these are inherent in the situation. What’s the point of agreeing to a 3, 4, or 5 percent wage increase, if inflation turns out to be 8 percent? Workers will have to constantly be on the guard, or see the purchasing power of their wages disappear.

These inflationary pressures will force a response – not just from workers in the advanced countries, but the billions of poor around the former colonial countries, who can barely afford to buy food.

The movements in Sri Lanka and Kazakhstan were sparked by the cost of living increasing dramatically. These countries will not be the last where we see such developments.

Persistent inflation is a sign that the capitalist system is in a deep crisis; that it can not find an equilibrium. Now, many countries are facing the unappealing prospect of both high inflation and recession.

The western imperialists, so enthusiastic about making Russia bleed in Ukraine, will come to regret their actions. The continuation of the war is turning the situation from bad to worse.

Inflation will act as the mole undermining the already unstable political systems all across the world.

The 10 richest people in the world have more than doubled their wealth since the start of the coronavirus pandemic, while over 160 million people have been driven into poverty. Inequality is killing one person every four seconds, and the poor are four times more likely to die of COVID-19 than the rich. This is all according to Oxfam’s 2022 report Inequality Kills.

From lack of access to healthcare, to extreme hunger, to the impact of climate change, more and more people are suffering easily preventable deaths. Meanwhile, the super-rich are shooting themselves into space, lounging on luxury yachts and ruthlessly profiteering from the pandemic.

Much like Omicron, the ‘billionaire variant’ is out of control, and poses an existential threat to humanity unless this sick capitalist system is uprooted entirely.

Marx wrote that: “Accumulation of wealth at one pole is at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole”. Over 150 years later, Oxfam’s report has shown these words are more relevant than ever.

The report demonstrates that inequality has resulted in 21,000 excess deaths every day since the start of the pandemic. While a significant proportion of these deaths are due to lack of access to healthcare, at least a quarter are from hunger, and an increasing number of deaths are being caused by the adverse effects of climate change on poor communities.

Worst impacted are people from so-called ‘developing’ countries, women, minority groups and all those who are already the most vulnerable under capitalism. The report states that, thanks to economic inequality, the pandemic has “been actively made deadlier, more prolonged, and more damaging to livelihoods”.

Oppression and imperialism

The report states that there were 13 million fewer women in employment in 2021 compared to the previous year. 20 million girls are expected never to return to school due to the strain that coronavirus has put on poorer households.

Violence against women has also dramatically worsened since the start of the pandemic. As the report explains:

“That people in poverty, women and girls, and racialized groups are so often disproportionately killed or harmed, more than those who are rich and privileged, is not an accidental error in today’s dominant form of capitalism, but a core part of it.”

While it is certainly no accident when the poor and oppressed suffer disproportionately, it is not any particular ‘form’ of capitalism that is responsible.

It is the very nature of capitalism to concentrate wealth in fewer and fewer hands, and in its period of senile decay plunge the vast majority of humanity to ever-deeper barbarism, starting with the most vulnerable.

A major contributor to the higher number of deaths in poor countries is a lack of access to vaccines, due to hoarding by the imperialist countries. The richest nations raced one another to gobble up the global vaccine supply, immunise their populations, and reopen their economies to get profits flowing as quickly as possible at the expense of the rest of the world.

This was aided and abetted by profiteering big pharma companies, eager to maximise their windfalls by prioritising the highest bidders for doses. The tragic impact of the disparity between rich and poor on COVID-19 patients is starkly reflected in the Oxfam report:

“Inequality of income is a stronger indicator of whether you will die from COVID-19 than age. Millions of people would still be alive today if they had had a vaccine — but they are dead, denied a chance while big pharmaceutical corporations continue to hold monopoly control of these technologies”.

The report describes the “strategic racism” of the ruling class, having “weaponised [racism] as a tool to advance free market fundamentalism, to gain support for an economic system that siphoned power from the public and transferred it into private hands”.

The report claims that this weaponisation of racism has been used to maintain control of vaccine production in developed capitalist nations like the USA and Britain, despite there being many viable vaccine manufacturing facilities in Africa and Asia.

The disgusting behaviour of the imperialist leaders certainly exposes their callous attitude towards oppressed nations. It is also clear that reactionary politicians in Europe and America exploited racism as part of a ‘culture war’ agenda, for example, Donald Trump spreading lies about the ‘China virus’.

But the reason Africa and Asia were prevented from developing cheaper vaccines locally had little to do with the racist views of western politicians, and far more to do with brute capitalist interests.

Countries like the USA and Britain lobbied on behalf of their big pharma capitalists to protect their intellectual property rights on the COVID-19 vaccines, to ensure they could be exploited for the greatest possible profit.

This is why pleas in 2020, by representatives from India and South Africa at the World Trade Organisation, to waive these IP protections were ignored – with disastrous consequences for the entire world, as we saw in the rise of the latest Omicron variant.

On top of that, waiving IP protection on the vaccines would have undermined the very institution of private property, and thus threatened the whole edifice of capitalism itself.

Meanwhile, attempts to alleviate the economic impact of the pandemic have widened the already yawning gulf between the richest and poorest nations widened during the pandemic, Oxfam reveals.

During the pandemic, the International Monetary Fund gave out 107 loans to some of the world’s poorest countries, all of which come with strings attached in the form of ‘structural adjustments’ (i.e. cuts) in order to service the resultant debt.

As well as further crippling these already underdeveloped economies, Oxfam suggests that austerity demanded by the IMF to pay off these loans will cause a severe worsening of “every type of inequality” within at least 73 countries. And thus, imperialism will continue to hold these countries in an artificial state of backwardness.

Billionaires ‘had a terrific pandemic’

This picture of poverty and despair for millions of people worldwide could not be further removed from the daily lives of the world’s super-rich. While income fell for 99 percent of people since the beginning of the coronavirus outbreak, Oxfam reports that billionaires “had a terrific pandemic”, with a new billionaire being created every 26 hours.

The combined wealth of the 10 richest men in the world has more than doubled, growing by roughly $700 billion over the last two years — an increase of $1.2 billion every day. The wealth increase of the world’s billionaires between March 2020 and November 2021 was larger than the previous 14 years of growth combined. This is a rate of wealth hoarding that is unprecedented in all of human history.

The wasted potential here is unimaginable. The profits made during the pandemic by the 10 richest individuals alone would be more than enough to fund a global vaccine rollout, as well as free, universal healthcare and social protection for the world’s entire population.

Jeff Bezos alone could afford to vaccinate everyone on earth with the profits he has made since the coronavirus outbreak.

Yet this is not how these parasites have chosen to spend their precious time and money. Rather than ‘wasting’ their money helping save millions of lives, the mega-rich have spent the pandemic enjoying greater luxuries than ever before. The last 12 months have seen huge increases in the demand for expensive goods such as caviar, super-yachts, private jets, champagne and fancy watches.

Luxury car manufacturer Rolls-Royce has reported that 2021 was the most successful period in the company’s 117-year history. In a shameful insult to the victims of the pandemic, Rolls-Royce CEO Torsten Muller-Otvos said: “Quite a lot of people witnessed people in their community dying from COVID. That makes them think life can be short, and you’d better live now.”

To the working class, the idea of spending millions on a luxury car after seeing the harrowing deaths of your close friends or family would be absurd — but this is precisely the mindset of the mega-rich, who have spent their whole lives profiting from the suffering of others.

A similarly out-of-touch statement was made by Carla Sora from Agriottica Lombarda, the biggest caviar farm in Italy, who recently said: “People in lockdown wanted to enjoy themselves, and everybody decided to spend money on caviar”.

This romantic vision of ‘everybody’ tucked away in their homes enjoying caviar and peacefully waiting out a lockdown would be touching, if it were not a shameful insult to those who lost their jobs, suffered domestic abuse or other myriad hardships during the pandemic. There can be no better manifesto for expropriating the parasitic, wealthy few than their own words!

No solution under capitalism

While Oxfam’s report is an astonishing review of the impact of global inequality, it is still unable to provide a solution that tackles the fundamental problem. Abigail Disney, grand niece of infamous exploiter Walt Disney and author of a foreword for the report, claims that, “the answer to these complicated problems is ironically simple: taxes”.

The report comes to similar conclusions, namely a “one-off solidarity tax” combined with “progressive spending and taxation”. US Senator Bernie Sanders also tweeted, in response to the report, that governments should “tax the rich” and “invest in the working class”.

Ultimately, however, the idea that capitalist governments should simply tax their way out of inequality is naive. Inequality is baked into the capitalist system and is a fundamental part of the exploitative process of profit generation that allows the super-rich and the ruling class to maintain control.

Asking the capitalist class to reform away their economic and social privileges is to ask a leopard to change its spots.

The only way to stop the millions of needless deaths from inequality is to expropriate the billionaires and use their ill-gotten gains to plan the economy according to the needs of society. It is the task of the working class, not bourgeois governments or billionaire elite, to kick out this rotten system and the poverty and inequality it creates.

Published in October of last year, at the height of the second wave in Britain, Grace Blakeley’s The Corona Crash provides an illuminating perspective on how the pandemic will change global capitalism in the years ahead.

To understand the capitalist system’s potential future, however, Blakeley correctly looks to the past. After all, as the author notes, and as the Marxists have pointed out previously, COVID-19 is not the ultimate cause of the current crisis. Capitalism was in a quagmire before the pandemic. And it will continue to stagnate and decline even after (if) the virus is vanquished.

“The severity of the pandemic-induced recession is at least in part a result of the pre-existing vulnerabilities of the global economy,” Blakeley asserts, highlighting the slow growth, ballooning debts, and increasing inequality seen worldwide in years prior to the coronavirus crisis.

Blakeley, a prominent economic commentator on the Left, draws attention to the “unprecedented economic interventions” by governments and central banks seen over the last year – “not to help the most vulnerable through the crisis, but to save capitalism from itself.”

This is exactly the purpose of Keynesian policies, as we have explained elsewhere. Keynesianism is an economic doctrine designed to defend the interests of the capitalist class, not the working class; a (futile) attempt to manage the system and “save capitalism” from its own contradictions.

State monopoly capitalism

Blakeley astutely notes, however, that such life support from the state is nothing new. This was already present before the ‘corona crash’, in the form of quantitative easing and other ultra-loose monetary policies.

And throughout history, despite their supposed admiration of the ‘free market’, the capitalists have always looked to the state at the first sign of trouble – as was seen in 2008, when the major financial corporations, deemed ‘too big to fail’, were bailed out by governments across the world.

The result today, the author asserts, is that we in fact live in a system of “state monopoly capitalism”: one in which the boundaries between governments, the banks, and big business have become increasingly blurred; where wealth and production is ever-more concentrated; and where the capitalists, Blakeley remarks, “have collapsed into the arms of the state, and appear set to become wholly and permanently reliant on it”.

Planning – in whose interest?

As we have also discussed previously, Blakeley highlights how this modern form of capitalism is essentially a planned economy, “except that the planning that is taking place is neither democratic nor rational”; planning not by-and-for the working class, but by “central bankers, senior politicians, and their advisors in big business and finance”.

The writer continues with a pertinent warning to the Left:

“We cannot fall into the trap…of believing that a quantitative increase in state activity somehow affects a qualitative shift from capitalism to socialism. Instead, we must concern ourselves with how state power is being used – and who is wielding it.”

Blakeley follows this with an extremely apt quotation from Lenin, in State and Revolution:

“The bourgeois reformist view that monopoly capitalism or state-monopoly capitalism is no longer capitalism, but can already be termed ‘state socialism’ or something of that sort, is a very widespread error…

“But however much of a plan they may create…we still remain under capitalism – capitalism, it is true, in its new stage, but still, unquestionably, capitalism.”

This reformist “error” is indeed “very widespread” – particularly so today in the left milieu that Blakeley and similar ‘trendy’ commentators inhabit.

Systemic crisis

Throughout her new book (in reality, an extended essay), Blakeley does a commendable job of largely avoiding the superficial reformist analysis that typically permeates such circles.

At the same time, she steers clear of the postmodernist view of history, as epitomised by the recent documentaries of Adam Curtis, which presents a disjointed ‘narrative’ of isolated events, ‘great’ individuals, and random historical ‘accidents’.

Instead, Blakeley connects the dots and draws out the economic and political processes that have led from the postwar boom, to the world crisis of the 1970s, to the financialisation of the 80s, to the globalisation of the 90s, to the 2008 slump, to the current ‘corona crash’.

Quoting Marx, for example, Blakeley explains how both concentration and crisis are inherent tendencies within capitalism; phenomena that result from the “immanent laws of capitalist production itself”; processes that logically arise from an economic system based on private ownership, competition, and production for profit.

Falling into the trap

Having come so far, however, the author unfortunately slips at the final – most important – hurdle, when it comes to outlining the way forward.

Blakeley rightly points the finger at capitalism as a whole, and openly calls for socialism, asserting that:

“Socialism does not simply mean expanding the size of the capitalist state. Socialism means taking power away from the ruling classes – senior politicians, business owners, and financiers – and handing it back to the people.”

“In order to achieve this goal,” Blakeley continues, “it is not enough to demand a bigger state – the nature of the state, and of all our economic and political institutions, must be fundamentally transformed…”

But exactly what this goal looks like – and, most importantly, how we are to achieve it – is left hanging. Instead, the writer slips into vague formulations about “democratic public planning of economic activity” and “the people”, blaming “neoliberalism” and calling for a “Green New Deal”.

This latter demand, however, is an allusion to precisely the same Keynesian state-regulated capitalism that Blakeley earlier warns is a reformist “trap” that the Left must avoid.

Need for revolution

Instead of this woolly reformism, the Left needs to fight for clear and bold socialist policies. We must demand nationalisation of the ‘commanding heights of the economy’, to be run under workers’ control and management.

Above all, we must not be afraid to say the words that Blakeley and her self-conscious, vogue peers dare not utter: We must organise to overthrow capitalism. We need a revolution.

‘The Corona Crash: How the Pandemic Will Change Capitalism’ by Grace Blakeley is available now from Verso Books.

The Office for Budget Responsibility has issued a warning that up to 40% of the loans given out under the government’s ‘Bounce Back Loan Scheme’ could default.

Around £33bn has already been lent out on this scheme, which sees small businesses given state-backed loans of up to £50,000, with minimal checks on their ability to repay. A further £20bn is expected to be lent over the next few months.

These businesses are crushed between two millstones: the big monopolies on side, whose vast economies of scale allow them to dominate the market; and collapsing consumer demand on the other. With 650,000 jobs already lost since the coronavirus crisis began, and millions more furloughed workers bracing for redundancy, the market is rapidly vanishing.

Even before the recent slump, the reality is that many of these companies have been kept afloat thanks to credit. Small-business owners have borrowed more and more just to stay above the waterline.

These are the so-called ‘zombie’ companies of capitalism: neither dead nor alive, but maintained in a state of limbo by a constant injection of cheap credit.

Heads we win, tails you lose

Whilst the banks make a killing on the interest charged in the short term, many of these businesses are unable to pay back their debts in the long run. Ultimately, many go bust – at which point the big finance-houses simply swoop in to strip and liquidate their assets.

In most cases, this is a win-win for the banks. They can rake in the interest whilst the businesses stagger on, and then sell-off assets to recoup their investment when they don’t. This is the parasitical modus operandi of modern finance capital.

With a global economy choked by overproduction, investment in real production is a mug’s game. Usury, on the other hand, still gives the big capitalists some bang for their buck. Investing in failing, zombie companies is like squeezing the last drips out of a used rag.

Nationalising the losses

This latest round of lending is the most parasitical of all. Given the depth of the crisis, the money-lenders are feeling less secure than usual in recouping their investments.

In order to ‘kickstart’ the economy, the government is backing their loans by promising to cover any debt that turns bad, out of the public purse. As usual, it is a case of nationalising the losses, whilst keeping the profits in private hands.

The government is hoping that, by propping up these businesses, the bosses will continue to pay wages, thereby protecting demand and preventing a vicious downward spiral of depression.

But it is quite obvious what will really happen: the banks will go on an orgy of high-risk lending, and leave the government to pick up the bill. And this bill will then be passed on to the working class by means of austerity.

Any jobs saved in the meantime, just like the companies themselves, will be zombies – kept alive artificially by a drip-feed of credit; and destroyed as soon as that credit runs out.

Socialist plan

Capitalism is an old and sick system. In its youth, such measures might have helped relieve its crises. But just as a dying patient cannot be immortalised with drips and adrenaline, neither can the decrepit capitalist system be saved by credit and stimulus packages.

Instead, the system must be wrested from the hands of the speculating parasites, and planned rationally, under the democratic control of the working class.

This means nationalising the banks and major monopolies, as part of a socialist economic plan. Only then can we ensure that the parasitic bankers and bosses do not continue to enrich themselves at our expense.

Recent economic data brought welcome news for embattled businesses around the world. IHS Markit’s Purchasing Managers’ Index, which gives an indication of whether companies are spending more or less, has risen from its historic lows. So, whereas IHS’s US index was 27 in April and 37 in May, it now stands at 47. That is getting close to the 50 mark, and anything above 50 would indicate expansion, rather than contraction. The figures are similar for other countries, with the index rising for all major economies.

Similarly, the jobs market seems to be improving, with the unemployment rate declining to 13.3 percent in the US from 14.7 percent in April (which was a post-war record). Consumer spending is increasing, and is now only 8.9 percent down, compared to some 33 percent in April. These figures don’t really tell us much about the general health of the economy. A certain recovery is inevitable, given that the lockdown meant an enforced reduction in economic output.

Somehow, the stock markets have managed to rally over the past few weeks, encouraged by the easing of the lockdown and the recent figures. Yet, that merely reveals how divorced the movement of the stock exchange has become from the developments in the real economy. The question isn’t whether the economy will see an increase in GDP, consumer spending etc. after lockdown measures are lifted but how fast and how far the economy will recover. Even with some recovery in the second half of the year, the figures are dire.

The IMF released their World Economic Outlook report on 24 June, where growth expectations were significantly revised downward from their April report (we commented on that report in April). Whereas in April the IMF was predicting a contraction of 3 percent of world GDP, it is now predicting a contraction of 5 percent, which is the worst since the 1930s. According to this forecast, the advanced economies will be worst affected, with a drop of 8 percent; France, Italy and Spain face a 13 percent contraction. The figures are far worse than 2009, which in themselves were a massive shock. This is, as the IMF itself calls it, “a crisis like no other”.

Wishful thinking

However, it is clear from their projections and analysis that the IMF wrongly perceives this crisis to be caused by the coronavirus. Therefore, they also envisage a recovery once the lockdown measures are lifted: basically a return to the kind of growth figures we saw before the present recession. They are predicting 5.4 percent growth of world GDP in 2021, which is almost twice the rate at which the world economy was growing in 2019, and bigger than the recovery in 2010, after the 2009 recession. Basically, the IMF is predicting that the economy will have recovered to its 2019 level sometime by the end of 2021. This idea, that we are approaching something akin to business as usual, regardless of the specifics of the growth figures, must be considered wishful thinking.

A number of factors are now pointing against a quick recovery. At the press conference, the IMF chief economist, Gita Gopinath, was full of confidence in the significant room for manoeuvre in both fiscal and monetary policy. Yet, in reality, the central banks have very limited abilities to stimulate the economy with historically low interest rates. In most advanced capitalist economies, the central bank lending rate is now at zero or just above zero. The only way out is quantitative easing. The ECB pandemic response programme, for example, is already at €1.35tn: almost twice the €750bn originally planned. Right now, consumer and company spending have taken a massive hit and the risk of inflation is limited, but as circumstances change, there is only so much money you can print before you create runaway inflation.

The other lever the state has to try to improve the economy, fiscal policy, is being used even more than during the last crisis. At that time, Gordon Brown proudly announced that the G20 would spend $5tn to stimulate the economy. This time around, the G20 have already announced spending of $10tn, or around 12 percent of GDP. Responding to a Chinese journalist, Gopinath warned that there are limits to how much money governments can spend before it becomes unsustainable. Indeed, without the central banks, particularly the ECB, buying up government bonds, the borrowing of governments would have already hit that ceiling. For the ex-colonial countries with weak currencies, this method is impossible, and 70 countries have already asked the IMF for assistance.

The US budget deficit is forecast to be 24 percent of GDP this year and 12 percent next year, a return to “normal”. The total debt of the advanced economies will be 131 percent of GDP at the end of the year, with the US on 141 percent. How long can this be kept up? As long as the central banks are providing a continuous flow of money, it will be fine, but if that stops, the markets will sour very rapidly. In fact, the economy has been completely addicted to cheap credit, without which it could no longer function.

The problem of state debt

The reality, as Christine Lagarde, the head of the ECB put it last Thursday at a meeting with European Business Leaders, is that: “this is the sharpest and deepest recession ever recorded in non-war time”, after a fall of GDP of 16 percent in the Euro area for the first two quarters of this year. She said recovery will be incomplete; and airline, hospitality and entertainment will probably be hurt irredeemably. She also pointed to the stock exchange volatility index, which although down since April, remains at an elevated level.

At the same meeting, Martin Wolf also gave a sombre assessment of the situation:

“We are going to end up with colossally expanded central bank balance sheets. I think they will be manageable but I think they will be permanent, or at least a very long time. We are going to start looking more like Japan, and that’s pretty big.”

That is to say, quantitative easing is not going away, but is going to be a permanent feature, as the interest rate tool has become useless, and the economy is too depressed in order to allow the central banks to withdraw their assets.

“There is almost certainly going to be permanent economic costs. That is to say our economies collectively and individually will be smaller, probably significantly smaller a few years from now than what we thought they would be back in 2019.”

This has to be considered in the light of the loss already incurred as a result of the financial crisis. In the understated manner of economists, when dealing with the class struggle:

“And already we had suffered a large permanent loss, particularly in the West from the financial crisis and those losses are real and significant and will have to be borne by people, and the question of who bears them will be a central political question.”

And further:

“Public finances will be permanently worse, we will have far more debt and we are going to emerge from this, in my view, with significant structural fiscal deficits. How those are managed and how… those are managed… are going to be central political issues for the future and they are not going to be easy”

That is, how to deal with the debt (i.e who is to pay) will be a central political issue. This is a warning for the ruling class: pay attention to this question. It is reminiscent of the period before the French and the English revolutions, when the feudal state had amassed a vast amount of debt, which it was trying to make the bourgeoisie pay for. But it is not just the state that has accumulated huge debts, as Lagarde pointed out: “The level of debt is massively going to increase, and not just at the sovereign level, but also at the corporate level.”

This presents central banks with a real problem. Interest rates have to remain low. Wolf again puts his finger on the crucial question, when he points out that real interest rates in most major countries are negative and therefore pose no immediate problem for governments. However, if this changes, there will be huge problems very rapidly:

“If there’s a roll-over in the next ten years of most of this [sovereign] debt, at real interest rates of two or three percent, I think we’re going to be in unbelievably big trouble. And therefore, this simply cannot happen.”

The key for him is the governments need to issue 20-to-50-year bonds to lock in low interest rates, but although that might work for the governments of Germany, Britain or the United States, it would not work for Italy and Spain, and corporations and consumers do not, in general, face the same possibilities. So, to keep the economy from going off a cliff edge, the cost of borrowing has to remain extremely low. This is the legacy of the huge amount of debt accumulated over the past 40 years, and the settling of government debt will be an explosive question over the coming years.

COVID-19 still spreading

It seems the financial markets and various commentators thought that the virus problem had now been solved. However, the number of cases in the US has just spiked, following the lifting of lockdown, including in the most populous states: California, Texas and Florida. In most of the south and the west of the country, the rate of infection is accelerating. To avoid infections spiralling out of control, many states now have been forced to reimpose lockdown measures to try to contain the disease. Furthermore, the infection has only gotten started in large parts of the world.

The economic fallout from the virus is not merely an effect of the measures taken by the state, but the spreading of the virus has a dampening effect on consumption regardless. Clearly, people worried about catching the virus will avoid the very same places that authorities could potentially close. As a result, consumer spending in those US states where the virus spreads rapidly have seen consumer spending stagnate or even fall over the past couple of weeks, despite the gradual easing of restrictions. This is also reflected in the number of hours worked, which has been falling since mid-June in a number of US states. So, lockdown or no lockdown, the economy will take a severe hit.

An acute crisis of overproduction

It is testament to the absurdity of capitalism that people not turning up to consume products and services will threaten the whole economy with collapse. In any other society, surplus production would have been something to celebrate, meaning storing up for a rainy day or having spare time, but under capitalism it is a disaster.

It is not just that the bosses are now demanding workers go out to work (most workers continued to work during the pandemic in any case), but they also have to go out to consume. They are very worried that workers are now saving too much, whether from lack of opportunities to consume, or from worrying about the future. Over the course of the pandemic, savings rates have grown by 136 percent in the Euro area.

Unsurprisingly, the worst paid workers are the ones that have been continuing to consume the largest share of their wages. After all, for these workers, very much more money would be spent on day-to-day essentials, like food and housing, and much less on restaurants, entertainment and holidays.

For some decades, Japan has been facing such an ongoing crisis of “too much” savings, and a corresponding stagnating economy (only reaching 1 percent growth, even in booms), as Japanese people simply aren’t spending enough. Martin Wolf commented on this in relation to the crisis that the world is facing:

“Japan suffers from absolutely structurally deficient demand… I think that is quite possibly going to be the global condition so I don’t think it’s inconceivable that we are going to look quite Japanese for a really long time. It is not certain, but it is possible.”

Such a development would spell a period of long-term stagnation for the world economy and, as in the case of Japan, massive state debts, as governments attempt to make up for the lack of demand in the economy. For all their speeches on the virtue of saving for a rainy day, the capitalist system demands that the workers take on an irresponsible amount of debt: it cannot keep functioning otherwise. Should that layer of the working class that has some discretionary spending choose to become more frugal, capitalism is in deep trouble.

The end of globalisation

Ted Grant pointed many times to the role that the expansion of world trade played in the development of the economy after the war. In 1997, he wrote:

“In reality, in this period, the capitalist system went beyond its own limits, through credit, indebtedness, Keynesian deficit financing and so on, and in particular through the development of world trade which partially and for a temporary period permitted the bourgeois to overcome the limits of the nation state.” (‘The First Tremors – An analysis of the global economic situation’)

The two main obstacles to the development of the economy are indeed private property and the nation state, the latter of which was partly overcome by the development of world trade. Although the development was delayed, through a continued massive expansion of credit, the document was correct in the direction of travel, and what would have happen in the event of a slump. It continued:

“However, we now enter into a new and very different period, a period of storm and stress and convulsive crises in the economy, society and politics. All the factors that combined to produce the upward spiral of growth will dialectically turn into their opposite. Above all world trade, which acted as a powerful spur to growth and investment, no longer has the same effect.”

This is precisely what the bourgeois is now afraid is taking place. Lagarde explained: “It is likely trade will be significantly reduced and it is likely as a result that productivity will be impaired unless it is pushed by other factors”. That is to say, international competition leads to investment, which raises productivity. So, unless other factors come into play, and she doesn’t seem to have any suggestions what those factors might be, productivity will stop rising or decline as a result of the fall in world trade.

Martin Wolf agrees with her assessment:

“[W]e are probably going to see a permanent change in the openness of the world economy, a shift against globalisation, at least in terms of things. All sorts of reasons: security, the nature of the economic shock, the rise of protectionism and so on… It is reasonably clear that the world we will re-emerge into… will look really quite profoundly different from the world we thought it would be a year ago or even four or five months ago.”

The coronavirus is having a particularly devastating effect on international trade, but it merely accelerated a development that we have been detailing for some time, including in May last year, when we detailed the protectionist measures taken by the main imperialist powers. Obviously the apologists of capitalism would like to forget that all this was taking place before the coronavirus, in the hope that it might somehow be resolved after the pandemic has passed. Still, as we’ve seen, the more farsighted have to admit that things will not return to the way they were, but they do not draw the necessary conclusions.

The new normal

If you read the comments of politicians, economists and commentators, at least the serious ones, it is clear that we’re entering into a new period. The IMF talks of a “swoosh” recovery, like the Nike logo. Christine Lagarde talks of “restrained” recovery. What they can all agree on is that the recovery is not going to be swift, and that things will not go back to the way they were even six months ago.

With every new blow to the world economy, we’re asked to lower our expectations of what capitalism can achieve. Now, Martin Wolf talks of a global situation like that of Japan, with chronically low growth, so low it is difficult to distinguish from stagnation. For one country to go through that is bad enough, when it’s the whole world economy, it’s a disaster.

Capitalism can only justify its existence by constantly developing the productive forces, by constantly developing productivity: by raising the productive potential of the economy. It really is otherwise a blatantly bankrupt system, as John Maynard Keynes recognised when comparing it to the Soviet Union in the 1920s. It could only maintain itself by seemingly constantly being able to provide better standards of living, at least in the imperialist countries.

Now that is finished. The handling of the pandemic has been a calamity, with over half a million dead, as government after government prevaricated about implementing measures, and the situation is still getting worse. But the economic system hasn’t just been incapable of preventing the infection from spreading, but has also prepared a quite avoidable economic calamity.

Capitalism can give nothing to the working class, except cuts. Now, mass unemployment is knocking on the door, starting in the service sector. Employers are going to ask workers to accept cuts to their terms and conditions in order to save ailing (and not-so-ailing) businesses. At the same time, what remains of the welfare state is going to come under relentless attack as governments attempt to repay the vast debts that governments are accruing by propping up the system. This will inevitably provoke an unprecedented wave of class struggle, which will put into question the capitalist system as a whole. It will pose the question clearly: socialism or barbarism. And that is the choice before humanity.

The UN’s World Food Programme has issued the dire warning that the world stands on the brink of a famine of “biblical proportions”. The UN thinks that at least 265 million people are being pushed to starvation as a result of the coronavirus crisis.

This is not because of a bad harvest; in fact, harvests have been good. It is entirely down to the severe economic crisis and dislocation in the world economy.

Capitalism to blame

Healthcare systems in impoverished and exploited countries will not be able to cope with the virus, and huge numbers will die. Social distancing will be impossible in such countries. Lockdowns pose an enormous barrier to the distribution of essential food in remote areas.

But this is far from being an unforeseeable biological disaster that has nothing to do with capitalism. Regardless of coronavirus, billions of people in the world can only eat if they get a wage – and even then they remain malnourished.

The economic chaos engulfing the world will lead to hundreds of millions going without a wage for a long time. Remittances from relatives working in richer countries will also dry up. In these conditions, it is not only those in remote areas, but millions in cities also who will face starvation in the next few months. The swelling ranks of refugees are in particularly desperate need.

Once the virus is finally defeated, we will be left with long-term economic damage, as well as many years of extreme austerity, due to the irrationality of capitalism. Protectionist policies will be increasingly pursued by world leaders, and institutions like the EU could break up amid mutual recriminations.

This will lead to years of economic crisis, uncertainty, and suffering – far worse than what was seen after 2008.

World poverty

The report from the UN mentions – without passing comment – that the figure of 265 million on the brink of starvation represents a doubling of the number before the virus spread. That is to say, without any unexpected virus ravaging the world, over 130 million people were already on the brink of starvation, two decades into the 21st century.

The head of the World Food Programme, David Beasley, “was already saying that 2020 would be the worst year since the second world war, on the basis of what we forecast at the end of last year.”

Recent years have seen the rise in a school of thought known as the ‘New Optimists’, celebrated by the likes of Bill Gates and making frequent appearances on TED Talks. They smugly explain that the world is relentlessly becoming a better place. People everywhere are getting richer; life expectancy is growing; and this will somehow just continue if we leave the ‘free market’ to do its job.

Their ideas were always rubbish, concocted out of cherry picked statistics and misleading averages masking growing inequality. What this crisis reveals is that capitalism is not making the world a better place. It is polluting and starving the planet.

Socialism or barbarism

The situation is so dire that the head of the UN’s World Food Programme is obliged to describe the situation facing humanity as ‘biblical’ – that is, as like an event from a 2,000 year old myth; from the era of the wooden plough and the crucifix.

In the year 2020 – more than fifty years after we put a man on the moon, in an age of ubiquitous smartphones and the ability to produce food for 10 billion people – we are being driven back to the time of the Bible.

That is the concrete meaning of Rosa Luxemburg’s famous and entirely correct statement that “Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism.”

Lenin also famously remarked that “capitalism is horror without end”. We are fighting against the capitalist system and its barbarism. We are fighting for socialism – the only way out for humanity. Join us!

Capitalism threatens mass starvation

Oliver Brotherton

A new WFP report begins bluntly, stating that we are now entering a period of global economic and social crisis, the likes of which have not been seen since the Second World War. Imperialism is driving ongoing wars in the Middle East, leading to humanitarian crises that are only worsened by growing economic instability in many countries in the region. Similarly, many African countries such as Sudan and Ethiopia are being hit by what the report describes as a ‘perfect storm’ of economic downturn and social instability, which is sweeping across the region. In addition, natural disasters, such as the current desert locust swarms spreading throughout countries such as Kenya, Uganda and Tanzania are threatening the livelihoods of over 25 million people. As a result, the WFP has found that over 821 million people around the world are ‘chronically hungry’ with a further 135 million on the brink of starvation.

Furthermore, into the chaos of war and economic turmoil comes the impact of the current coronavirus pandemic. The WFP statement suggests that the number of people facing starvation in the next few months is likely to double (to over 260 million) as a result of economic and health impacts of COVID-19. Perhaps the most shocking revelation, however, was the UN’s worst-case scenario prediction of over 35 countries experiencing widespread famine in the coming period. This would involve thousands of people starving to death every day, primarily in the world’s most conflict-ridden areas. The predicted growth of famine and hunger comes not just as a result of natural disaster and disease, however. The WFP report states that there is a ‘real danger’ that the death toll from the economic impact of the coronavirus will be higher than that from the disease itself. The global drop in overseas aid has already hit countries such as Haiti, Nepal and Somalia, where the worst-off are reliant on donations from charities in wealthier countries to survive. Collapsing tourism is worsening economic crises across the world, particularly in countries like Ethiopia, where it accounts for almost half of total exports. These are countries where the exploitation of the working class by imperialism and by their own ruling class is at an extremely high level. The economic catastrophes being engendered by the current pandemic will only worsen their position, as the ruling class seeks to protect its profits and to offload the burdens of crisis onto the workers.

A long-brewing crisis

Crucially, this report shows more clearly than ever that the current global crisis has been building for a long time before the outbreak of COVID-19. Hunger, poverty and conflict were already widespread, particularly in Africa and the Middle East, and the unexpected pressure of lockdown has only added fuel to the fire. With thousands expected to die from the virus and its broader economic impact, as well as many more made unable to work, the pandemic has accelerated a process of economic and social decline that was already in motion. This ‘perfect storm’ of poverty, economic downturn, social instability and now lockdown is expected to cripple economies across the world, with added complications such as the collapse in oil prices meaning that many of the world’s poorest nations are now struggling for economic survival.

But these crises are not unavoidable. They are the direct result of the capitalist system, which is driven solely by the quest for profit. The capitalist class is unable to provide a way out. Current research shows that global food production right now is capable of meeting the requirements of almost 10 billion people, which could satisfy the projected world population for another 30 years. And yet, billions of people live on the edge of starvation. These are the realities of an economic system which values profit rather than food distribution.

In a world of growing humanitarian crises, the need for economic planning and a rational distribution of the worlds’ resources has never been clearer. The funding and donations of the WFP, while they have grown to become a necessity for much of the world, represent a plaster on a gaping wound. Should these donations dry up, a likely scenario in the next period, over 300,000 people could starve to death every day. This is not a sign of a healthy economic system. Indeed, in the coming crisis, capitalism will not even be willing to afford this meagre measure, when faced with economic turmoil. The millions of deaths that are likely as a result of the fallout of COVID-19 and the deepening crisis of capitalism will be a direct consequence of the capitalist system.

The statistics stated in the WFP report are a damning condemnation of capitalism, which is not even capable of feeding vast sections of humanity. The global coronavirus pandemic will mean a qualitative change for the worse for millions of people around the globe, while the ruling class will shield itself. Under capitalism, it is the working class who carries the weight of a crisis, while the ruling class reap the profits of a success. In the case of starvation and famine, this is truer than ever. Rather than running the economy to meet the growing needs of the working class, the bosses will only act in their class interests, which are based on protecting their profits and privileges. Only an economy planned to meet the needs of those who maintain it can be trusted to prevent famine and mass starvation. Capitalism is not fit for purpose. Only socialist measures will be able to tackle the barbarism that will come.